Summary

CUSIP 9128283R9, with a coupon rate of 0.5%, probably will auction with an after-inflation yield near 0.75%.

That means buyers will get it at a discount to par value, about $97.50 per $100 before accrued inflation is added in.

The inflation breakeven rate is in the ‘neutral’ zone, meaning this TIPS is fairly priced versus a nominal 10-year Treasury.

I’d say this auction looks attractive. The inflation breakeven rate is reasonable and if the 10-year yield can hold above 0.75%, it would mark the highest yield since May 2011 for a 9- to 10-year TIPS at auction. That’s nearly seven years!